Mar
21Restaurant Coupons - Be Cautious - They May Not Be for You
Filed Under (Managing a Restaurant, Marketing a New Restaurant, Menu Development, Running a New Restaurant, Uncategorized) by Larry on 21-03-2010
If you were to believe the pundits and restaurant marketing “experts”, coupons are the way to drive traffic to your restaurant and solve all your problems. Don’t believe it if you are the average independent full service restaurant. There are successful, although costly and addictive, methods that some food service operations survive based on couponing, giveaways and incentives to buy. For instance many pizza operators (particularly chains) heavily utilize coupons to motivate a guest to buy their product. Once they start and a big promotion pays off (they think) with dozens of redemption’s, there is no way to measure the negative effects on their business.
Coupons are difficult to measure because:
- You can’t count the ones used by existing customers who otherwise would have paid full price without the discount. That bottom line effect is not what you want.
- The customer who responds to a coupon purely for the low price will never be a loyal guest - which should be your goal. This type of customer will move to the next cheaper promotion from another restaurant.
- Once you raise awareness that you CAN sell your product for less, how do you convince people that your food is worth more in the future?
- What does there regular use of coupons say about your brand? Does this type of marketing lead to the impression that you are a “discount” restaurant not to be taken seriously?
You may be inclined to eliminate all coupons from you marketing tools, but there are RIGHT ways to occasionally offer incentives without becoming addicted - or addicting the customer. Here are a few ways to properly use coupons, discounts and special offers:
- Only use an incentive that you can measure the response and judge the quality of the responder.
- A coupon or special offer can be used to introduce a new menu item, service or guest program.
- Coupons and incentives can be used effectively if you have huge peaks and valleys in seasonal business. For instance, if you have a lot of tourists October through May, you may want to use promotions during the slower months. Make sure you let your year round guests know why you are offering the incentive.
- Bounce-back coupons can be effective and one of the most overlooked techniques to increase restaurant sales. Your frequent diners may be offered a coupon to bring a friend, relative or neighbor to receive a discount for the evening. Or you can increase the frequency of regular visits by implementing a “slow Tuesday” dinner deal or similar method to get the packed house on Fridays and Saturdays to return on a non-peak night.
- “Thank You” coupons or discounts can be useful and rewarding for those regular guests as a loyalty builder. Limit them to certain evenings and times that make sense for your operation.
As we slowly eek our way out of the recession, the restaurant industry is closely watching what damages have been done from all the discounting and giveaway deals that have driven traffic, but done little to improve loyalty. An example is Denny’s. They have gone so far as giving away free meals to tens of thousands of people, yet their same store sales declines still out pace the market, not to mention the franchisees who are disenchanted by the marketing program.
The relatively new social marketing move to throw restaurant coupons all over sites like Facebook, MySpace, Twitter and other similar sites may work for the chains, but independents need to be cautious and wary of the negative sides of couponing in general and Internet social marketing in general.
I’m in total agreement about the coupon dilemma you highlight here. For lack of a term other than a cliche, coupons are a slippery slope.
At our small, independent restaurant, we have sadly conditioned our customers to expect a coupon. While they are the type of “thank you coupon” you mentioned, we’ve been giving them out non-stop for years. Our base of regulars is decidedly mostly “couponers.” If they don’t get a coupon, they get angry. We should just cut all our prices and publicize the 15% across the board discount. And we wonder why our bottom line has been hurting so badly.
It’s like a horrible addiction. Any advice on weening our regulars off of coupons? I know they all love our food over our competitors’ food, but they feel entitled to the discount.
Be cautious? I say don’t do it at all. Your Denny’s example is not so unique. Once one starts offering the mega discounts all the others in that “concept” really have to as well. The owners of most of all the chains anymore are a board of directors. These directors need to worry about what goes on inside their four walls and stop worrying about competition. If the product is good then people don’t mind paying. If the service is good it will set them ahead. Really there are millions of consumers right? So, I ask why would any one want to give their hard earned work away? It’s a ridiculous pissing contest that has to stop. I would rather pay more and get a better experience then to pay less and see what a lack of bottom line does to the service end of the deal. If a business is making less then the business is paying less! Substandard service will turn a guest/customer off and you then will have to give it all away when you shut your doors. Spend that advertising/coupon dropping money on payroll. Hire the best. The results will reflect in under 6 months.
Your addiction analogy was spot on. People grow to expect it and when a restaurant stops offering it the people will go to where they visited less frequently but remember where they got treated better. That is all.
We don’t do any coupons and we have never done any coupons. We debated this concept and decided that either we are offering value or we aren’t, and that we have run the pricing scenarios correctly and are in tune with our market. Cheapening our product array by offering discount coupons in our eyes sends the wrong message and cheapens our product line in every sense of the word. Our customers seeks value, which we feel is not primarily price driven. For us, it’s about making the customer feel they have a strong perceived value about their purchase such that they leave remembering the quality and value of our products and their great experience during their visit, and that they are already filled with the anticipation of their next return to our business. Sure they can drive down the street and coupon themselves left and right, but I am certain based based on competitors in my segment that my products are superior and my pricing is fair and reasonable.
Hi,
I just stumled upon on your website. My friends and I are starting to look into opening a restaurant right now. Your websit has been an eye opener. Thank you for that. I was wondering if you have any pointers for first time restaurant owners?
[...] you haven’t visited the previous post about the pitfalls of couponing (March 21, Restaurant Coupons - Be Cautious) AND the related comments, you may want to read the post and the comments. Notwithstanding the [...]